JULY/AUGUST 2015
PUBLISHED SINCE 1898 | WRITTEN FOR BUYERS OF TRANSPORTATION SERVICES
FASTer THE LOGISTICS OF THE RAG TRADE 2015 SHIPPER’S CHOICE AWARDS Carriers who exceed industry benchmarks for performance excellence
SOUTH AMERICAN TRADE Service and capacity growth
www.canadianshipper.com
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IT’S SIMPLE: BEST SERVICE. BEST PRICE.
THAT’S OUR INTERMODAL GUARANTEE. TORONTO TO CALGARY/ VANCOUVER, EACH WAY AND EVERYWHERE IN BETWEEN.
cpsales@cpr.ca | cpr.ca/en/our-markets
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CONTENTS
JULY/AUGUST 2015
DEPARTMENTS
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6 | Editor’s Forward Dealing with cultural differences
COVER STORY
in the global arena.
FASTER FASHION
8 | Viewpoint The 2015 Surface Transportation
Whether it’s off the rack or high fashion the logistics behind the “rag trade” of clothing and accessories is a dynamic, ever-challenging mix.
Summit offers a full array of options for both carriers and shippers.
12 | In the News Transport Canada’s new air security program.
62 | The Bigger Picture Panama may be a solution to more than one bottleneck.
30 2015
SHIPPER’S CHOICE
SHIPPER’S CHOICE
Our 14th annual Shipper’s Choice Awards Survey sets industry benchmarks for carrier performance excellence. Who is exceeding them?
Inside the world of runway shows and the logistics behind the clothing.Courtesy DHL Express Canada.
FEATURES LATIN AMERICAN INFRASTRUCTURE | 24 Key updates and trends from this region of growing importance for Canadian shippers.
SCMA CONFERENCE REPORT | 48 The annual Supply Chain Management Association conference was held this year in Halifax, Nova Scotia. Highlights featured a look at aligning business processes, physical assets and information systems, and tips for applying the principles of supply chain management. continued
www.canadianshipper.com July/August 2015 3
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WHAT’S ONLINE
continued
INTERMODAL | 52 CSX opens its first intermodal terminal in Canada.
MASS CUSTOMIZATION | 56 Additive manufacturing-commonly known as 3D printing-has been experiencing a newfound popularity, thanks in part to commercialization of consumer-grade products. How will supply chains be affected? Will 3D printing be a supply chain disruptor?
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WEB TV Transportation Matters
AS THE WORLD TURNS Is the air cargo industry ready for ever-evolving supply chains?
SHAPING THE AGENDA CITT’s Canada Logistics Conference 2015 to cover industry hot button issues.
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BLOG BITS Search our blog archives at ctl.ca
Carolina Billings “I am a person not a brand” When is it appropriate to consider yourself as a “brand”? What is a brand?,
Dan Goodwill Freight Bid Tip #1 – Obtain Buy-in and Participation from the Operating Divisions
Find us on Twitter at: @CanadianShipper
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@LouSmyrlis
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@JuliaKuzeljevic
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@JamesMenzies
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www.canadianshipper.com
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@FleetExecutive
July/August 2015
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EDITOR'S FORWARD Julia Kuzeljevich
There are no foreign lands, only foreign travellers
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s Canadian Shipper heads to press, we have just returned from the SCMA annual conference in Halifax, some highlights of which we feature in this issue. The conference kickoff took place at the Canadian Museum of Immigration at Pier 21, (originally a shed!), through which one million immigrants, refugees, war brides, evacuee children and displaced persons passed between 1928 and 1971. So many Canadians can trace their ancestry to other lands, in some cases to perilous journeys and rough beginnings. For Canada’s supply chain professionals, a nation like Canada where multiple cultures are represented, and where there is an ever changing dynamic, creates a certain advantage when they head abroad or deal in the global arena, as many do. A colleague and friend spends a good part of his day managing a project with support staff in three different countries. His understanding of the cultural differences amongst these teams, and his tolerance as a Canadian has made him a go-to person of sorts. The thing that struck me most was that as a Canadian he had had more exposure to the cultural differences of several countries that are geographically closer together than each is to Canada. Working on our fashion logistics feature this month I talked to many supply chain professionals who spend a good part of each month on the road managing the needs of the fast-paced fashion sector, as more companies seek to take their brands global, and to embrace the reaches of e-commerce. At the SCMA conference,Vincent Dixon, SCMP, and VP of Procurement for Stelia Aerospace, told attendees about spending a year in France based out of Rochefort, helping lead a merger of two companies, Sogerma and Stelia. There is a formal hierarchy of position and pay in France, and with it a certain level of respect accorded. “In France my experience was that meetings always started late, but ended late too. If you’re in a position of authority or you’re trying to negotiate, it’s easier to go with the flow,” said the supply chain professional with 25 years’ experience in automotive, energy and aerospace. “In North America, I might just call out a greeting to everyone while in France it was important to do a full walk around the room. North America has become more digitalized in the way we do business-there are not as many face to face contacts. In France, they won’t negotiate with you until you’re physically in the room. We had a lot of suppliers in the U.S., many of which are on the West Coast. They wanted them present.When they came they got further along on the deal than they realized they would, so the travel, in the aerospace industry especially, is important,” he said.
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July/August 2015
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The need for thorough documentation was another aspect to consider. “In France what I had to deal with was the level of detail in the slides. I found that all the presentations were in English on the slides but they spoke in French. The level of complexity was high. As you’re travelling to other countries and sending a presentation, how is it going to be perceived? Sometimes you feel you may not need it, but when we start dealing with Asian and Middle Eastern countries small misses in the language can really affect the outcome,” he added. Another issue that came up was that of ethics. “As I represented this group in France we ended up spending a lot of time around the world, particularly in China. The gifts were unreal. I felt at the time I wanted to say no, but I was told by everyone that that was impolite.You have to act professionally while considering the culture you’re in. Accepting gifts, while you may feel a large gift is unethical, may be the best bet in building and preserving the relationship,” he said. From greetings to handshakes to eye contact, it’s easy to make an error in judgement. To some cultures, particularly in Asia, business card giving is a piece of who you are. “It’s now changing with a more Westernized younger generation. I have a habit of putting a note on a business card to remind me of that person. The message I received from the interpreter is that I was defacing their document,” Dixon recalled. You could argue that hierarchy and formality have their place, but in Canada we have a lot more access to the various tiers of staff with whom we work. “I have an office in Lunenberg and many people will come into my office during the day. In France, I never saw anyone who reported to me. You have a structured hierarchy, and it’s a fight to be granted a meeting. In China, when negotiating a deal, the only time the CEO would speak, it was directly to me, No one else would answer,” he said. While not utopia, countries like Canada benefit from a workforce geared toward tolerance, well armed with skills that it takes to maneuver in the increasingly global arena. Citing Robert Louis Stevenson, Dixon said, “There are no foreign lands. It is the traveller only who is foreign.” CS
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4188-35 MOL CSh Emp Ad (Oper) F_8.125 x 10.875 6/26/15 11:53 AM Page 1
Michael Checchi
Vice President, Area Operations – MOL (America) Inc.
MINUTES
IN-TERMINAL* TRUCK TURN TIME
JACKSONVILLE LOS ANGELES
•
49 MINUTES
•
•
MAY 2015
OAKLAND
•
27 MINUTES
TARGET: <30 MIN.
What’s behind a number? People. People like Michael Checchi. Professionals committed to the highest level of service. Whether it’s ensuring trucks get in and out of the terminal quickly or making sure our vessels remain on schedule, a top-notch team is in place to deliver what you need when you need it. Review all of our fresh KPI results at CountOnMOL.com.
*Defined as gate-in time to gate-out time. Includes total moves in and out (import, export, local and IPI) for all customers. Does not include time spent waiting outside of the gate before entry.
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THE VIEW Lou Smyrlis, MCILT July/August 2015 Volume 118 Issue No.4
See you at the Summit on October 14th It’s the best lineup of topics and speakers we’ve ever put together
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or several years now we, along with our sister publication Fleet Executive and Dan Goodwill and Associates, have taken a proactive approach to improving shipper-carrier relations, by bringing the buyers and providers of surface transportation services under the same roof with the Surface Transportation Summit to discuss and debate key industry issues. This year is no different and we are proud to open registration for what we think is the best lineup of topics and speakers we have yet put together.This year’s Surface Transportation Summit takes place once again at the Mississauga Convention Centre on October 14.Visit www.surfacetransportationsummit.com to register. We are particularly excited that the Freight Management Association of Canada has jumped on board this year as a partner, helping us with the shipper portion of the conference. Another new wrinkle this year is the Business Matching program. Those participating in the Business Matching session will be able to pre-select in advance of the conference the companies with whom they wish to meet for private one-on-one 20-minute discussions, allowing both parties to discuss business opportunities in depth. The Economic Outlook, which starts the Summit, should be particularly interesting this year. The economic recovery stumbled in 2015 as a 50% drop in the price of oil had a dramatic impact on Canada’s energy sector but made for cheaper energy pricing for the manufacturing sector. Meanwhile the significant drop in the value of the Canadian currency (and other currencies) compared to the U.S. dollar is having an impact on north-south traffic flows. How will these forces play out over the next 12 months? One of Canada’s leading economists will provide an economic overview of 2015 and share his insights on where the economy is headed in 2016. He will be joined by a leading equity analyst who follows the transportation sector and will offer his perspective on how the economy will affect truck and rail carriers specifically. And I will also be interviewing carrier executives for their thoughts on the coming year and how they will be shaping their business strategy accordingly. Another favorite session back this year is The View from the Top, with rail, trucking, 3PL and OEM executives sharing where they plan to take their organizations in 2016. This will be followed with the largest Shipper-Carrier Roundtable we have put together. I’m moderating this session, featuring no fewer than seven key industry executives representing major carriers, shippers and 3PLs, and we will leave no major subject untouched.You may want to sit up close, there could be some fireworks with this one. For many years, shippers have used carrier scorecards to track their carriers on on time pick-up, on time delivery, claims and billing accuracy.With tightening capacity, carriers are employing scorecards to evaluate their customers on a variety of measurements (e.g. ease of pick-up, profitability etc.). Our straight talk track will provide a forum for shippers and carriers to discuss their respective metrics and measurement tools to see how their goals and expectations align with each other. Logistics service providers have grown significantly over the past 15 or 20 years. Many manufacturers and retailers are utilizing a 3PL for at least some of their supply chain operations. Is outsourcing to a 3PL the right strategy for your business? Our track will provide research on the latest trends in 3PL utilization and will include insights from a major shipper who has gone through the process of exploration and evaluation of 3PL services. The retail sector is undergoing major changes. E-commerce, omni-channel distribution, smart apps, same-day delivery and a host of other developments are profoundly changing the way retailers do business.These changes are impacting every facet of logistics and transportation from order processing to warehouse management to customer delivery.We close with an impactful panel discussion with supply chain executives from two leading Canadian retailing giants and a leading retail market consultant sharing their insights on where the retail industry is headed. As mentioned it’s an agenda that we are very proud of. I hope to see you there come October 14th. To find out more and to register, the address once again is www.surfacetransportationsummit.com CS 8
July/August 2015
EDITOR Julia Kuzeljevich (416) 510-6880 Julia@TransportationMedia.ca EDITORIAL DIRECTOR Lou Smyrlis (416) 510-6881 Lou@TransportationMedia.ca ART DIRECTOR Ellie Robinson erobinson@annexnewcom.ca CONTRIBUTING EDITORS Carroll McCormick, Leo Ryan, James Menzies, John G. Smith, Ian Putzger, Ken Mark, Carolyn Gruske MARKET PRODUCTION MANAGER Kim Collins (416) 510-6779 kcollins@annexnewcom.ca VIDEO PRODUCTION MANAGER Brad Ling RESEARCH MANAGER Laura Moffatt CIRCULATION MANAGER Mary Garufi (416) 614-5831 mary@newcom.ca PUBLISHER Nick Krukowski (416) 510-5108 nkrukowski@canadianshipper.com VICE-PRESIDENT PUBLISHING Joe Glionna PRESIDENT Jim Glionna HEAD OFFICE: 80 Valleybrook Drive, Toronto, ON M3B 2S9 Canadian Shipper is written for Canadian transportation and logistics professionals who manage product flow from manufacturer to point-of-sale. Editorial is focused on reporting, analysis and interpretation of Canadian logistics trends and issues. It is published by NEWCOM BUSINESS MEDIA INC.
SUBSCRIPTIONS: Contact us at: mmarasigan@annexnewcom.ca Tel: 416 442 5600 ext. 3548. Fax: 416 510 6875. Website: canadianshipper.com (click on subscription button)
SUBSCRIPTION RATES: Canada: $65.95 + applicable taxes, per year; $107.95 + applicable taxes, for two years. U.S.A.: US$107.95 per year. All other foreign: US$107.95 per year. Single copies $8 except for the annual Logistics Buyers’ Guide (Aug) $60.95 + applicable taxes, (not including HST) plus $2.00 for postage. USA: US$68..95, Foreign: US$68.95 ISSN 2292-2490 (print), ISSN 2292-2504 (Digital), (Canadian Shipper.) Indexed by Canadian Business Periodicals Index. Printed in Canada. All rights reserved. The contents of this publication may not be reproduced either in part or in full without the consent of the copyright owner. POSTMASTER: Please forward forms 29B and 67B to: 80 Valleybrook Drive, Toronto, Ontario, M3B 2S9 Second Class Mail Registration Number 0721.
PUBLICATIONS MAIL AGREEMENT 40069240 We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage MEMBER CANADIAN BUSINESS PRESS
www.canadianshipper.com
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A HUGE BOOST IN CARGO TRAFFIC WITH THE STROKE OF A PEN
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The implementation of the new Canada-EU free-trade agreement is set to create new opportunities and generate growth on both sides of the Atlantic. As a major gateway for trade between Europe and North America, we’re perfectly positioned for a huge boost in cargo traffic – and to help you profit from the good things headed this way. Find out what we can do for you at port-montreal.com/why-montreal
15-07-06 12:11 PM
ON OCTOBER 14th 2015, PLEASE PLAN ON JOINING CANADA’S TOP TRANSPORTATION EXECUTIVES FOR A DAY OF EDUCATION & NETWORKING. We have created an agenda that truly addresses the many challenges facing both Shipper and Carrier executives.
2015 SUMMIT AGENDA THE ECONOMY IN 2016: Leading economic experts provide their projections for the coming year & industry executives outline their strategic response.
John Ferguson President & CEO SCI
Walter Spracklin, CFA Equity Research Analyst, Transportation Sector RBC Capital Markets
THE VIEW FROM THE TOP: The transportation executive’s perspective on the major trends driving transportation in 2016 and beyond. SHIPPER-CARRIER ROUNDTABLE: How should shippers and carriers react to the challenges shaping the transportation industry? Leading shippers and carriers participate in a frank and open discussion.
Douglas Nix
Vice Chairman Corporate Finance Associates
Anne McKee
Executive Vice President Trailer Wizards Ltd.
Carl
Senio Sc
THE FUTURE OF RETAIL DISTRIBUTION IN CANADA: E-commerce, omnichannel distribution, smart apps, same-day delivery are all profoundly changing the way retailers do business and impacting every facet of logistics and transportation. How should transportation professionals adapt? CARRIER BENCHMARKING: Do you know how your company stacks up against the competition on key variables such as cost per mile & revenue per mile? How to find out without breaking competition laws.
Ginnie Venslovaitis
Director, Transportation Operations Hudson’s Bay
Mark Lerner
Assistant Vice President Intermodal Sales CN Rail
Ra
Co-Foun Sta
BEST PRACTICES IN MERGERS & ACQUISITIONS: Hear from the experts on the best way to go about buying a trucking company, freight broker or full service logistics provider. SHIPPER & CARRIER SCORECARDS: Straight talk on the metrics and measurement tools used to see how shipper and carrier goals and expectations align with each other. IS OUTSOURCING TO A 3PL THE RIGHT STRATEGY FOR YOUR BUSINESS?: Learn what the latest research reveals about 3PL utilization and effectiveness and hear first hand from a major shipper who embarked on an exploration and evaluation of 3PL services.
Registration: 7:30 am Presentations: 8:20 am sharp
Brian Ware
VP, Marketing and Business Development Lakeside Logistics
Douglas Davis
Co-Founder & Partner StakUp Inc.
#sts15
MISSISSAUGA CONVENTION CENTRE 75 Derry Road West, Mississauga, ON
For more information and to register, please visit www.SurfaceTransportationSummit.com
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President rds Ltd.
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SURFACE TRANSPORTATION
ummit
2015
Introducing the 2015 team of presenters...
Carlos Gomes
Senior Economist Scotiabank
Ray Haight
Co-Founder & Partner StakUp Inc.
Alex Boxhorn
Logistics Manager Loewen Windows
Chris Henry
Dan Einwechter
Kelli Saunders
Kimberly Wildenmann
Co-Founder & President, StakUp Inc.
President Morai Logistics Inc.
CEO Challenger Group of Companies
Traffic Coordinator Lantic Inc.
Serge Carestia
Joe Lombardo
Vice President Director, Transportation TRANSPORTATIONMEDIA Supply Chain and Terminal Operations The Home Depot Canada Purolator Truck News . Truck West . Fleet Executive . Canadian Shipper . TMTV . Surface Transportation Summit
TRUCK NEWS
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Bret Walters
General Manager Operations Chalifour Canada
Mark Bylsma
President Spring Creek Carriers Inc.
Silvy Wright
President & CEO Northbridge Financial Corporation
Dave Zavitz
Robert Wiebe
Doug Munro
Senior Vice President, Sales & Marketing Canada Cartage
Senior Vice President Supply Chain Loblaw Companies Limited
President / Owner Maritime-Ontario Freight Lines Limited
Jason Dubois
Mike McCarron
Dan Goodwill
President Len Dubois Trucking Inc.
Steven J Brown
Partner, National Consumer & Industrial Products Industry Leader, Deloitte
President, Left Lane Associates
Wesley Armour
President & CEO Armour Transportation Systems
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Managing Director Investment Banking Cormark Securities
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IN THE NEWS
Transport Canada Air Cargo Security Program to introduce new participant categories Transport Canada will be making changes to its Air Cargo Security Program, aiming at securing the supply chain while reducing cargo screening bottlenecks for the $100 billion per year of cargo departing from Canadian airports. The Canadian Aviation Security Regulations, 2012, will be amended to expand the air cargo Secure Supply Chain, said the agency. The program has three phases, the first of which is now complete, with requirements established for air carriers and freight forwarders. The approach is based on three key principles: • That participants in the Air Cargo Security program are secure, with applicants
BY JULIA KUZELJEVICH
undergoing a comprehensive application process and being thoroughly vetted and subject to inspection by Transport Canada. • Cargo must be screened by authorized participants using TransportCanada prescribed methods to enter the Secure Supply Chain, and • Participants ensure cargo maintains its secure status through verifiable chain-of-custody procedures. In the fall of 2015, members of the air cargo industry will be able to apply to participate in the Air Cargo Security Program under new participant categories. Participation is voluntary for secure supply
©Thinkstock
Check it out! The Annual Survey of the Canadian Supply Chain Professional – Canada’s most comprehensive benchmark study of the supply chain professional ever conducted is now live! Your participation will ensure an accurate benchmark of salaries in the supply chain sector.
TH
To make your voice count, please visit our homepage at www.CanadianShipper.com and follow the link to the survey. Results of the survey will be featured in the October issues of PurchasingB2B, MM&D, and Canadian Shipper, and online.
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Thank you in advance for your contribution!
At t me disc
www.canadianshipper.com
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THE PORT OF PRINCE RUPERT
North America’s leading-edge gateway. At the Port of Prince Rupert, fast transit times and high delivery reliability set us apart. Planned expansion means significant opportunities for growth and further enhancement of terminal capacities. It’s time to discover how to share our advantages with your customers.
rupertport.com | @rupertport p12-17 CdnShipper JulyAug2015_News3.indd 13
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IN THE NEWS
chain stakeholders, who should base their decision on the nature of their cargo operations and their business needs. The second phase of the program, expected to be in force by the fall of 2016, expands the secure supply chain to shippers and other cargo operators. The air cargo
industry is expected to have more options to determine where within the supply chain authorized participants can screen cargo to make it secure for air transport on flights carrying both passengers and cargo. (Phase 3, scheduled for 2017, will see re-
quirements enhanced for all-cargo air carriers and industry training.) “Transport Canada is now doing targeted outreach to shippers.We don’t expect most shippers to become ‘known consignors’, depending on their degree of involvement. We have a bit more variety of participant options and we hope this allows industry to find a fit. If shippers are good candidates to become known consignors we can have a discussion with them and help alleviate any concerns about po-
“Transport Canada is now doing targeted outreach to shippers. We don’t expect most shippers to become ‘known consignors’, depending on their degree of involvement. We have a bit more variety of participant options and we hope this allows industry to find a fit. If shippers are good candidates to become known consignors we can have a discussion with them and help alleviate any concerns about potential bottleneck,”
KEEPING OUR COOL
WHEN THE PRESSURE IS ON Our AC Absoluteo and AC Pharmacair solutions are available at over 30 cities worldwide, and the list is growing: an international network of cool chain experts for all your healthcare shipments. Find out more at aircanadacargo.com
Michael Campbell, Chief, Air Cargo Security Promotion & Outreach, Aviation Security, Program Development, with Transport Canada,
Air Canada Cargo | Going further. aircanadacargo.com
tential bottlenecks,” said Michael Campbell, Chief, Air Cargo Security Promotion & Outreach, Aviation Security, Program Development, with Transport Canada, in a presentation to the air cargo industry May 19. He noted that Transport Canada is consulting with industry and will come forward with options that can be used in chain of custody requirements. Canadian shippers will be able to participate in the Air Cargo Security Program continued
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Smoother operations. That ’s Ryder. Specialized capabilities and proactive services—that’s what allows us to continuously optimize supply chain operations and cut inbound logistics costs by up to 15%. Discover how outsourcing with us can improve your fleet management and supply chain performance at ryder.com.
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Ryder and the Ryder logo are registered trademarks of Ryder System, Inc. Copyright © 2015 Ryder System, Inc. Ever better is a trademark of Ryder System, Inc. PT000000 041315
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IN THE NEWS
under one of two proposed new participant categoriesKnown Consignor or Account Consignor. Known consignors originate cargo and screen it by way of packing to make it secure. Shippers of high value, unique, or perishable air cargo might apply to become known consignors for quality control of their product, to reduce potential security delays and/or to reduce additional screening fees. Account consignors originate cargo and have an authorized participant screen it to make it secure. Shippers might apply to become account consignors because it is more cost effective for their business than building screening capacity within their own organization, and/or, there is low risk of damage to their cargo by having a third party screen it due to the nature of their product. If shipping to the U.S., shippers must be
either known consigners or account consigners (with additional screening potentially required), while non-participant shippers would face limits on where and how their cargo could be transported by air. These details would be confidential, said the agency. The program will transition existing Registered Shippers to Account Consignor status under the amended regulations expected to come into force in fall 2016. Existing Registered Shippers wishing to reduce potential security delays and/or reduce additional screening fees should apply to the Air Cargo Security Program as Known Consignors in fall 2015. Those not applying to become Known Consignors will become Account Consignors but Transport Canada may need to acquire additional information from them.
Transport Canada is also rolling out an application process in fall of 2015 for Certified Agents, who accept, store and/or transport cargo that has been screened and made secure by and authorized participant in the Air Cargo Security Program, for Regulated Agents, who screen cargo on behalf of others to make it secure and subsequently store and/or transport the secure cargo, and for Authorized Cargo Administrators, who direct the movement of secure cargo without coming into contact with it (i.e. provide logistics services without screening, storing and/or transporting the secure cargo). CS Editor Julia Kuzeljevich has been writing about transportation issues for 15 years. Her articles have garnered several transportation and Canadian Business Press writing awards.
www.canadianshipper.com
July/August 2015
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FASHION LOGISTICS
FROM THE TRENDY TO THE LUXURIOUS, THE LOGISTICS BEHIND GETTING CLOTHING
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he fashion industry has many specific, often confusing regulations covering everything from samples to fabrics. For locally established fashion designers looking to further expand their business into international markets, dealing with myriad customs requirements and logistics can be a daunting prospect. In 2014 DHL created its Exported program, teaming up with IMG fashion to help local designers get established and to promote their brands internationally. DHL is also the global Official Logistics Partner of IMG’s Fashion Week events around the world, an annual series of shows in 11 countries spanning four continents. The program sees winning designers, who are chosen by a committee of regional experts, receive support across two consecutive seasons on show production and promotion as well as all logistical aspects. DHL called the first year of the program a resounding success. And this summer, Canadian designers will also have the opportunity to apply. Designers from around the world will be asked to submit an application package and select a key international Fashion Week event of their choice: Mercedes-Benz Fashion Week in New York, London Fashion Week, Milan Fashion Week or Mercedes-Benz Fashion Week Tokyo. A committee of regional experts in each of these markets will review applicants and decide which designer demonstrates the most promise to benefit from debuting their collections at the event. “We are really, really engaged with fashion week and we have pushed very heavily to be involved in it,” said Andrew Williams, CEO for DHL Express Canada. DHL will sponsor a chosen designer for two consecutive seasons at each of the four Fashion Weeks. Designers will receive a guaranteed spot on the schedule along with a funded and produced runway show. DHL will also underwrite all logistics costs of producing the collection (i.e. international shipping and exporting of hard goods) as well as exporting the collection to New York, London, Milan or Tokyo for the designers’ runway debut. Christopher and Nicholas Kunz, of design team Nicholas K, were the 2014 winners of DHL Exported Milan, receiving logistics support for the duration of the program. “Everything was just provided. It was kind of like stepping into a second office. DHL supported us in so many different ways, from helping us produce the samples, to transporting them between the factories, getting the samples in time for the New York show, and of course, making Milan such a seamless production,” said Nicholas 18
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Kunz, in an interview for DHL Exported. “The brilliant thing about the Exported program is it doesn’t just give you that one opportunity so buyers can see the full range of your product,” Kunz added. For designers like Francesca Liberatore, 2014 winner of the DHL Exported New York program, there is not only exposure of her brand but logistics know-how she would not otherwise have had access to. “If I wouldn’t have DHL, I’m just an Italian coming to show in a new market. Most of the time you would not be able to show what you have that’s special. With DHL they gave me the opportunity which is the most important thing. I’m not just an Italian who knows people in Italy and can reach the internal market, but actually can have a partnership all over the world. And I think this is the most important thing, to make other people confident in a brand,” she said. Depending on the client’s requirements, fashion logistics services could be anything from providing them simple transport to running full DC’s, or even participating in their e-commerce activities. “We are involved in all elements of the fashion supply chain-it’s a big business for us globally.We segment our own business into sectors. This could be bringing in textiles from other markets or supporting those who have manufactured the goods here in the Canadian market and are exporting the finished goods,” Williams said. “Canadian fashion companies, regardless of size, realize they need to open up other markets from an export perspective. There has been a lot of entry from large global brands into the Canadian market. We are involved with IMG international fashion week because we believe that the future for Canadian fashion involves fashion outside the country,” he added. The company can also integrate directly into the customer’s own trade automation system. “This allows our customers to calculate their landed costs in the textile sector. It is complicated-tools like this help pull back the curtain on what they need to do to successfully export. What our customers are good at is fashion-not rules. We lay out all the options that make the most sense for them. We are able to run the full spectrum of solutions for a client-i.e. if that involves disposal of packaging, or running a returns process, or helping clients set up the right type of website for direct to consumer,” Williams said. According to Scott Irvine, Vice President of Sales with Remco, globally there are two interesting segments that appear to be growing: one is the fast fashion segment, (which includes companies like H&M, Zara and Uniqlo) and where styles turn fairly quickly. “This requires an extremely flexible supply chain, because you
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FASHION LOGISTICS
BY JULIA KUZELJEVICH
CLOTHING TO MARKET IS AN EVER-EVOLVING, CHALLENGING TASK are processing a lot of volume which can fluctuate dramatically from season to season.There is only a certain amount that can be spent to get the garment on the floor (because the retail price has to be kept at a certain point.) There is also a lot of growth in the luxury segment -these brands require special handling, and security is a very important issue,” Irvine said. The segments have similar but different needs. In the luxury segment it becomes very customized- often with Garment on Hanger service. These shippers often need special security requirements, and they are more likely to use a dedicated vehicle. “Remco, in terms of our history, has been and still is the pre-eminent Garment on hanger (GOH) carrier in Canada for many years. Now that many garments are made overseas and mostly moved in boxes, we are in the process of evolving to become a carrier providing superior value to retailers. More and more we are working with our customers to create logistics solutions that include warehousing, transport, and technology with a wider scope than before,” said Irvine. “In fast fashion it is volume and reliability-it’s a big assembly line. If you are supposed to be at a store at 9:00 am to deliver 6-8 pallets, reliability, predictability and repeatability become very important,” he added. This reliability is paramount as the peak season, which typically started with back to school in August, now starts as early as July, and carries through into Christmas peak. Wholesalers selling to retailers reach their peak in September/October. Another interesting trend, noted Irvine, is that more and more wholesalers are opening up their own retail chains. “So the wholesaler/retailer line becomes much more blurry. At the same time retailers are starting private labelling brands to essentially become wholesalers,” he said. “What we’ve seen is some significant investment from a number of our clients in their own retail presence. In the last two years there has been more volume from a number of these customers, and an continued www.canadianshipper.com
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uptick in interest from a number of these clients in e-commerce platforms. We haven’t necessarily seen massive volumes but the higher end side is looking at pushing into a Canadian e-commerce strategy, (vs. serving customers out of the U.S.).The cost of getting goods across the border is still a big hindrance-do
they maintain separate inventories? A number of customers are still grappling with that,” said Jeff Cullen, CEO, Rodair. Rodair International handles Canadian distribution for high fashion lines such as Prada and Louis Vuitton, and works domestically with high end retailers and boutiques.
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Cullen noted there is a little bit less elasticity in the high fashion lines, even when the economy goes soft. “We haven’t seen dives/falls in volume on that retail side, and this is consistent over the 20 years we’ve played in that space,” he said. While it caters mostly to the luxury market, Rodair also handles a significant amount of hanging garment, with 255,000 sq.ft. total space out of Toronto committed to apparel and retail. Some of that space is dedicated to hanging distribution, from factory on hanger right through to the retail floor. With the advent of e-commerce, consumers are better educated, and adding the ability to compare pricing real-time online makes them more effective buyers.These buyers have clear expectations of 100% in-stock and fast, and in most cases, free home deliveries. “Social media can make or break a new online retailer based on positive or negative shopping experience feedback often affected by the timing of order preparation, customer service responsiveness, timely deliveries etc. so consequently retailers are more and more demanding with their service providers,” said Luca Baldoni, Corporate Sales Director, Regional Head Office Americas, for Geodis Wilson USA, Inc. Retailers have also seen a proportional increase of returns with the increase of ecommerce sales. This has a big impact on return logistics and restocks for the e-retailers (usually at a cost three times higher than the original distribution). At the same time it is crucial to process returns quickly to maintain availability and to ensure that as much stock as continued
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DHL's Exported program provides full logistics support for winners' line launches. Courtesy DHL Express Canada.
possible is resold at full price before going into the outlets/discount channels where they will bring much less profit, Baldoni noted. Baldoni said that more fashion brands are discovering that supply chains and DC locations designed for keeping physical stores are no longer relevant. “The challenge for the retailers is to have an inventory that shifts/ transfers quickly across channels and to find the right providers that can facilitate this. In e-commerce with cross-docking and VMI, operations are shifting from origin to destination, so retailers shift back the inventory cost to suppliers and minimize their cost,” he said. This creates the need for end to end solutions. “Global transport providers need to be more innovative, not only based on port to port or airport to airport alone. Also, profit maximization is being replaced with a cost and risk approach-this opens a completely new scenario where fashion companies accept to partner with service providers to analyze their existing transport and logistics supply chain and find new solutions,” Baldoni said. The new solutions see visibility becoming more important than ever. “Today’s supply chain solutions do focus more and more on offering analytics data that facilitate decision-making, rather than merely providing a static visibility.The need for real-time analytics it is very important for the stakeholders as it makes information more actionable. Service providers that will master real-time visibility offers will dominate the market in the near future,” Baldoni said. This visibility becomes crucial when expanding into international markets. Canada’s largest lingerie retailer La Vie en Rose just announced its expansion into the South American market, having already made inroads into the Middle East. With nearly 230 stores across Canada and over 90 international 22
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points of sale, Boutique la Vie en Rose Inc., arrived on the South American continent with the opening of its first boutique in Panama last May 20th. The company plans to open four more boutiques in Panama in the short term. The country presents a high sale potential with 85% of its population aged under 55 years old, and in the medium term, the company expects significant growth for la Vie en Rose boutiques in other Central and South American countries. “We are extremely proud of bringing our Canadian brand, LaVie en Rose, to a new continent,” said François Roberge, President and CEO. Roberge is also the honorary president of a recently created steering committee, comprised of a group of entrepreneurs who chose to get involved and work together to create and bring to fruition an industrial fashion cluster in the Greater Montreal area. La Vie en Rose started expanding in 2004, and has experienced rapid growth since 2010. It has more than doubled the number of countries where it is present as well as its total number of international points of sale and annual revenues. Boutique la Vie en Rose Inc. also plans to expand in the Asian market and to export its swimwear concepts, la Vie en Rose Aqua and Bikini Village. “In the next 12 months alone, 23 additional openings are planned,” explains Alessandro Caruso, International General Manager. “In five years we successfully doubled our sales and we anticipate doubling them again within the next three years.” According to Caruso, “what we’ve seen in the last 12-18 months is a lot of brands trying to go international. From a Canadian perspective, consumers are interested in international concepts, in the importance of having an international experience. Having been international forces us to compete with companies in 20 different
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markets. From a business perspective we deal with master franchisees wanting to increase their margins because of competition. Logistics operations have to be tight,” he said. Caruso said the company expanded first to Panama “because we had springboard status in the region-it’s a hub in terms of being a location where many people from central and South America go to vacation. It’s also part of the Colón Free Trade Zone,” he said, referring to the zone at the Atlantic entrance to the Panama Canal which dedicated to re-exporting a wide variety of merchandise to Latin America and the Caribbean. It is a free port, the largest such port in the Americas and second largest in the world. “It’s also a logistics hub, a low duty country with no onerous restrictions. They use U.S. currency so it gives us a relatively good idea of how to price goods in the marketplace,” Caruso said. La Vie en Rose’s lines are mostly manufactured in China, and in India and Bangladesh for additional supply, then shipped to the company’s logistics hub in Hong Kong. “We deal with master franchisees who have a number of brands-we load in Hong Kong with the other brands and they receive the goods much quicker rather than if they had waited to consolidate,” Caruso said. Shifting transport strategies in fashion logistics are the result of better supply chain predictability in many cases. With a lot of Rodair’s client base, there can be larger propensity for air freight because of perishability and seasonality. “We’ve found we have a couple of customers who have started to merge from a predominantly wholesale model to a retail model, strategically shifting from air freight to ocean. In the past wholesalers would fly it in and it sat there waiting. As they’ve moved more into their own retail systems they can better predict their supply chains and avoid warehousing,” Cullen noted. “We have developed some of our own specific assets for hanging merchandise in a secure container that fits on to an over the road truck. “For the longer distances we’ve actually developed our own patented 'totes'-regular sized, equivalent to a skid, designed to handle flat or hanging merchandise, so we can put it on a regular LTL trailer.The tote is the secure method of transport and gives us that integrity of security, cleanliness, and protection. That allows us to transport hanging goods/flat goods over longer distances without them being crushed or improperly loaded,” Cullen said. Adds Remco’s Irvine, “When you’re dealing in the fashion segment it’s easy for product to become contaminated by smell or to get dirty. You’re transporting a product that is extremely high value. People who service the industry are therefore extremely careful about what else moves on the truck. The solution becomes much more customized. Many providers in this market run a dedicated service. Because Remco focuses 95% on retail we have a retail network with multiple customers on our trucks.We go to the mall with several different customers’ stock on our trucks. That’s how we’ve been able to create differentiation in the market.” Another part of what’s changing is the retailers themselves are now super focused on process efficiencies and monitoring store labour. This is changing the requirements for transport providers-anything that can minimize store labour is attractive to the retailers. “When we arrive at the store, if the transport provider can now scan the product and provide the information about the shipment to the retailers, the floor staff can better focus on floor sales.These kinds of process efficiencies are commonplace, in the U.S., and as there are more U.S. and global retailers in Canada they are also becoming a requirement here as well,” Irvine said.
Irvine said there is a very real possibility we could see more and more off-hours and unattended deliveries. New technology developments have made is much easier for drivers to be given a security pass, monitored and checked in, with access beyond the delivery area restricted or prevented. Doing retail logistics very well requires a lot of customization. “You’re dealing with high value merchandise that has no serial number and is easily liquidated in any flea market. So one of the things we’ve done is install a proprietary locking mechanism on the truck door. So once that door is down, it is automatically locked.There is an investment required to have this but it translates into highly secure loads which is very important to our customers,” he said. “Looking at the main challenges that fashion companies are facing now days, a staggering fact is that only 75% of the products purchased make it to the shelves on time. The surprising aspect is that on average the per-piece logistic cost component is about 25% of the total cost, of which 2.5% is related to direct costs (transportation, customs, distribution, etc.) and 22.5% invisible indirect costs (obsolescence, inventory carrying costs, lost sales-outlets, etc.,” said Baldoni. “We partner with our customers to work together to reduce the indirect cost component through better visibility and control through our e-solutions, creating savings first and foremost and to re-focus the approach on direct costs utilizing faster services and overall aiming to increase that 75% indicator of items on shelves on time,” he said. CS
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THE RIPPLE EFFECT LATIN AMERICA EMBARKS ON ACCELERATED UPGRADES TO ITS INFRASTRUCTURE. BY KEN MARK
The "new and improved" Panama Canal will open April 1, 2016. Photo courtesy Mala Rae.
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Panama Canal Railway. Photo courtesy Mala Rae.
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any Latin American countries are committing huge amounts of money to update their transportation and logistics infrastructure. They believe such strategic investments will make their products more competitive, create new jobs and expand their middle class. In contrast, many of the world’s advanced economies including Canada are ignoring such investments in the name of government austerity. The starkest example is Germany’s museum-quality Kiel Canal. The century-old, 100-km long structure links the Baltic and North Seas and is the lifeblood feeder to the port of Hamburg. Last year almost 34,500 ships passed through it, more ships than the Panama and Suez canals combined. Many ships are ignoring the hassles and delays and taking a longer, roundabout route that adds 600-km to the trip. Yet the German government has announced no plans to restore or replace the canal. Now, on to the good news. The eyes of the shipping world will all be focused on the new and improved Panama Canal on April 1, 2016. That is the proposed opening date for the U.S.$7-billion canal expansion featuring 22-storey-high lock gates and a third set of locks. Such improvements will enable the 77-km long, 101-year-old waterway to serve “Post-Panamax” ships. The super-sized locks-width 55 m. vs. (old 33.5 m.), length 367.6 vs. (294.1 m.), depth - 18.3 m. vs. (12.6 m.) and the canal’s ship capacity-13,000 containers vs. (5,000) will boost its strategic value to shippers and carriers and double its tonnage capacity. By 2025, Panama’s share of total annual global shipping volume is also expected to double to eight percent. As well, major investments in support services and modern facilities elsewhere in the country will expand Panama’s offerings as a value-added logistics hub. Before, most ships simply passed through the canal. But not any more. Recently one vessel stopped at the Caribbean-side harbour, picked up 2,000 containers, proceeded through the canal and ultimately delivered them to the Siberian port of Nadhodka in Russia. The ongoing backlog at U.S. West Coast ports has boosted containership traffic through the canal by three to four percent. Says Panama Canal Authority CEO Jorge Quijano “It has had a positive impact for us, but the Suez Canal has been the big winner because it can handle the Post-Panamax ships.” In response, even before the last cement block is laid for the curcontinued
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Container ships and pleasure craft dot the Panama Canal region. Photo courtesy Mala Rae.
rent upgrade, Quijano is laying plans on how to compete head-tohead with his Egypt-based rival. His weapon of choice is a fourth set of locks to serve next-generation ships capable of carrying 20,000 containers. He estimates the cost of the future project to be U.S.$16 billion to U.S.$17 billion and take 15 years to complete. In preparation, he has started talking to the China Harbour Engineering Company Ltd. (CHEC), a subsidiary of state-owned China Communications Construction Co. Ltd. about financing and building his dream. The current project did encounter challenges. The original budget was U.S. $5.25 billion. But a financial dispute between the Canal Authority and the construction consortium led to a 14-month delay and bumped up the original costs of U.S. $5.25 billion by one-third. As well, Panama also lost about U.S. $400 million in toll revenue as major cargo shippers such as Denmark’s A.P. Moeller-Maersk, Maersk and Taiwan’s Evergreen rerouted part of their operations. The impact of the modern canal has started to ripple through other ports in the region forcing them to accelerate upgrades to their own facilities. These include Norfolk, Va., and Savannah, Ga.; Kingston, Jamaica; Cartagena and Buenaventura in Colombia; and Suape and Santos in Brazil. Miami, the first U.S. port of call after the Panama along with 14 other Florida ports is tapping into a 5-year, U.S.$4 billion state building fund approved last year. While China has been flexing its financial, engineering and construction muscle throughout the region, Aecon Group Inc., Canada’s largest publicly traded construction firm, pulled a rabbit out of the hat by building Quito Ecuador’s new international airport. It crafted a creative and successful U.S. $5.7 billion proposal based on the public-private-procurement (P3) financing model. Besides involving another private sector partner, the project also received support from various international funding agencies including the Inter-American Development Bank (IADB) and our own Export Development Canada (EDC). 26
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In addition, the Canadian Commercial Corporation (CCC) signed a back-to-back contract with Aecon as well as a separate one with the purchaser, an Ecuadorean government agency. Says CCC president and CEO, Martin Zablocki, “In public sector infrastructure projects, CCC can be the right solution for government procurement requirements that are challenging to deliver through the traditional competitive process model. In Quito, we saw CCC’s value in risk mitigation at work, and this is something that is attractive to both Canadian companies and foreign governments.” Construction of the U.S. $534.5-million project began in 2005. Along the way, it survived a constitutional court challenge over whether the airport fees to be used to pay back lenders were actually government taxes. After numerous rounds of negotiations lasting almost a year, the parties successfully reached agreement in August 2010. Following its February 2013 opening, the new airport was named the 2014 Global Travel Best Airport in South America Award. More important, its initial annual cargo capacity of 250,000 tonnes will eventually rise to 440,000 tonnes. To help achieve those targets, the new airport’s cargo and support areas feature 10,000 sq. m of storage space, 2,200 sq. m for offices, modern refrigerated storage and bonded facilities as well as a 5,000 sq. m. maintenance hangar. In addition, there is an adjacent 60-ha free-trade business zone that can be expanded to 220 ha. These facilities are crucial for expanding Ecuador’s agricultural exports such as cut flowers, especially roses. New or modernized airport projects are also popping up elsewhere in the region. In February of this year, the Chilean government selected a consortium for the concession of the Santiago Arturo Merino Benítez International Airport. Last September, Mexico jumped on the bandwagon after President Enrique Peña Nieto announced plans for a new international airport to be built adjacent to the existing Bento Juárez airport.With
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WE’RE RAISING THE BAR, YEAR AFTER YEAR. At Groupe Robert, going the extra mile is not wishful thinking; for the 5th consecutive year, our clients have expressed their satisfaction and we have been awarded a SHIPPER’S CHOICE AWARD by the Canadian Shipper Magazine, entitling us to use the prestigious label of CARRIER OF CHOICE. Being recognised by our own customers makes these awards very special because our business is built on satisfying the needs of our clientele. We cannot disregard our wonderful group of employees, at all levels, that make things happen on a daily basis and are therefore directly involved in sharing the honours. Our promise is to continue to serve our actual and future clients in such a way that they will increase their competitiveness and contribute positively to the Canadian economy as much as their own profitability. Groupe Robert, your CARRIER OF CHOICE.
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trade agreements with scores of foreign countries, lower wages and young, skilled workers. The strategy is already paying dividends since Mexico has now surpassed Canada in annual automotive output. A modern and resilient transportation network and logistics services sector played a major role in that achievement. A recent report concluded that rail shipments of auto parts from Monterrey in northeastern Mexico arrive in Chicago in four to five days at a cost of U.S. $3,058. In comparison, similar shipments from Shanghai take 22 days at a cost of U.S. $5,239. Such a breakthrough makes “nearshoring” decisions easier for Canadian and U.S. firms. It can help them cut costs and raise profits while shortening delivery times and boosting customer satisfaction through more reliable delivery times. In Peru, the government has put together a portfolio of infrastructure projects over the next six years valued at U.S. $113 billion to modernize its transport network. It is a bold first step to reduce the Andean nation’s esti-
an estimated cost of U.S. $11 billion it will be Mexico’s biggest infrastructure project ever. It is due to open in 2020. Mexico’s Economy Secretary, Ildefonso Guajardo, believes the new airport could become Latin America’s largest logistics hub handling 1.2 million tonnes of freight annually by 2030. However, he cautioned that this depends on developing suitable logistics services alongside the infrastructure. The future operator of the airport is also building the Pirámides-Texcoco highway to connect the existing airport to the east of the state of Mexico. The U.S. $111 million 17.1km highway project will be completed in August 2016. In addition, it will also widen to 10 lanes the México-Texcoco highway, the main access route to the airport. These are the latest steps in Mexico’s aggressive policy of investing in next-generation transportation infrastructure to leverage its growing list of manufacturing advantages. These include NAFTA-market proximity, free
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mated U.S. $121 billion infrastructure deficit. Most of the funds will target building and upgrading highways in the central highland area. It includes a contract to build, operate and maintain a 640-km section that will be the fourth leg of Peru’s Longitudinal de la Sierra highway that stretches 3,673 km north to south running parallel to the coastal Panamericana highway. Further south, Chile and Argentina are jointly planning to build the Agua Negra bi-national tunnel linking Chile’s Coquimbo region and Argentina’s San Juan province. The tunnel will be about 13.9 km long and sit roughly 3.6 km above sea level. The project is part of a larger plan to link roads in Southern Cone nations, i.e., Argentina, Chile, Paraguay, Uruguay, Southern Brazil and the Brazilian state of São Paulo. The highway will also connect Brazil’s Atlantic Ocean, Santos and Porto Alegre, among others, to Chile’s Pacific Oceanport of Coquimbo. Project financing will be split 72 percent Argentina and 28 percent Chile 28. The completed highway will have two lanes in each direction and a speed limit of 100 km/h. Although many of Brazil’s current infrastructure projects are focused on preparing for the 2016 Olympic Games, it is also seeking foreign funding for up to U.S.$1.5 billion to dredge the harbours of its major seaports including Santos - the busiest container port in Latin America.Over the next decade, Brazil is expected to spend an additional U.S. $1.1 billion on improving its antiquated port infrastructure. Such upgrades are long overdue. Says Mississauga-based Mellowhawk Logistics Inc. president & managing director Arnon Mello,“The was a serious fire in Santos that burned for several days in April which prevented trucks from approaching the docks. It forced many shippers to use the smaller nearby port of Itajaí.” Thankfully, other Latin American countries are upgrading their infrastructure in a more orderly way rather than simply responding to a disaster. CS Ken Mark is a veteran technology expert, who has covered supply chain management since it was called distribution and has documented its legitimization as a critical business function. He holds an MBA from York University.
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2015
SHIPPER’S CHOICE
UP TO THE CHALLENGE Our 14th Annual Shipper’s Choice Awards Survey sets industry benchmarks for performance excellence and identifies the 35 carriers who exceed them
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ny economy with GDP growth less than 3% will present uneven business conditions based on geographic region and industry sector. That makes it challenging for carriers working across the country and across industry sectors to determine the right amount of capacity additions and for shippers to be sure they have the capacity they need. At the same time, our research shows that cost containment remains the top priority among Canadian buyers of transportation services thanks to the slow economic recovery and intense competition in certain sectors. Carriers need to invest in the equipment, technology and service strategies necessary to keep up with mounting shipper expectations but need to keep their aspirations in check with economic realities. These factors, of course, have a spillover effect on customer service levels. It places carriers in a tight spot but our research shows clearly that no matter what the challenge, some carriers are able to rise to it. They’ve learned how to best balance atop that quality service at a competitive price tightrope, during both tough economic times and growth periods. This report reflects the research we conduct annually in an attempt to provide buyers of transportation services with consistent, national and scientifically derived benchmarks of excellence for carrier performance in each mode.
Geographic distribution of respondents
30%
52%
18%
Western Canada
Central Canada
Eastern Canada
This year 35 carriers managed to surpass the Benchmark of Excellence in our 14th Annual Shipper’s Choice Awards Survey. Particularly impressive are the carriers who have scored above the benchmark of excellence for five years in a row to be awarded our special “Carrier of Choice” designation. To see these winners, turn to the final page of this report. Our survey provides shippers, 3PL service providers and freight forwarders across Canada with the opportunity to set benchmarks for carrier performance on eight key performance indicators (KPIs) and to rate their top carriers against those benchmarks. Aside from identifying the best carriers across all modes through this process, survey respondents also provide clear indications of the different values Canadian buyers of transportation services place on each key performance indicator (KPI) based on mode as well as a comparison of how high these standards are set for each mode. (For example, transportation buyers set their highest standard on information technology for couriers while expecting TL carriers to live up to the highest standard for competitive pricing.) The importance survey participants place on the KPIs for each mode (based on a five-point scale) is used as a weight in calculating carrier evaluations. Survey participants then rate up to three of their main carriers in each mode (again on a five-point scale.) The final weighted score for each carcontinued
Importance Of Performance Criteria Mode
On-time performance
Quality of equipment & operations
Information technology
Competitive pricing
Customer service
Leadership in problem solving
Ability to provide value-added services
Sustainable transportation practices
4.601
4.637
4.700
4.558
4.121
4.278
Air Carriers
4.906
4.569
Couriers
4.857
4.358
4.519
4.734
4.663
4.374
3.885
4.163
LTLTrucking
4.767
4.358
4.098
4.700
4.692
4.416
3.658
4.078
Ocean Carriers
4.621
4.420
4.337
4.724
4.635
4.447
4.063
4.167
Rail Carriers
4.583
4.346
4.315
4.712
4.620
4.410
3.933
4.222
TL Trucking
4.842
4.508
4.163
4.737
4.655
4.429
3.936
4.188
30 July/August 2015 www.canadianshipper.com
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All-Connect and Shuttle Express would like to extend our sincerest gratitude to all of our customers for helping us set & achieve the industry standard in the LTL & Truckload categories for the 5th year in a row
Thank You!
OAKVILLE
HAWKESBURY
MONTREAL
Truckload & LTL Regular or Expedited Freight Transportation Bull Ring Equipped Trailers
KITCHENER
PITTSBURGH
Hazardous Goods Temperature Controlled Warehousing & Distribution Flatbeds / Stepdecks / Rolltites
1.800.388.7947 www.allconnect.ca
we’re putting
p30-47 CdnShipper JulyAug2015_ShippersChoice3.indd 31
value in motion
15-07-06 2:54 PM
2015
SHIPPER’S CHOICE
Average shipper satisfaction ratings for each KPI are shown by mode.The final column on the right shows the total benchmark of excellence set for each mode. The benchmarks for each of the eight KPIs per mode are indicated with each modal table on the following pages. Invitations were sent to more than 6,000 of our readers who are buyers of transportation services in the manufacturing, retail and other sectors as well as to individuals responsible for managing shipments within the freight forwarding and 3PL sectors. Carriers must receive a minimum number of evaluations in order to qualify for the award. It should be noted that this year winning was made all the more difficult because we once again raised the number of evaluations necessary to qualify for the award for almost every mode. In order to boost response, carriers were given the opportunity to forward the survey to their own customer lists. Not all carriers chose to do so, however. To prevent tampering, we check for multiple cases submitted by known respondents. If
rier is derived by multiplying the carrier’s average performance score by the average importance rating for each key performance indicator for that mode. Because survey participants are first asked to rate the importance they place on each of the eight KPIs when making their carrier selections, and that data is used as a weight on their carrier evaluations, we feel that the benchmarks set are truly standards of excellence. In other words, carrier performance is judged against an ideal of what shippers expect and the areas given the most weight are the ones that matter most to buyers of transportation services.As a result, of the hundreds of carriers rated in our survey, only a very few are deemed by participants’ evaluations as providing a service so superior that it warrants a Shipper’s Choice Award. Carriers receive the Shipper’s Choice Award when their total score meets or surpasses the total benchmark of excellence for their mode. Only those carriers who exceed this benchmark have their names and scores included in the following tables.
continued
Shipper Satisfaction Ratings By Mode Mode
On-time performance
Quality of equipment & operations
Information technology
Competitive pricing
Customer service
Leadership in problem solving
Ability to provide value-added services
Sustainable transportation practices
Total satisfaction score
Air Carriers
21.42
19.54
18.94
19.03
19.71
18.35
16.01
16.89
149.878
Couriers
20.72
18.39
18.70
19.01
18.38
16.36
14.44
16.29
142.306
LTLTrucking
20.44
18.50
16.36
19.87
19.89
17.78
14.57
16.57
143.982
Ocean Carriers
19.14
18.19
17.17
19.43
19.11
17.41
15.59
16.30
142.344
Rail Carriers
17.04
16.84
16.92
18.71
16.60
15.15
13.27
15.67
130.200
TL Trucking
21.31
19.63
16.64
20.29
20.41
18.50
16.04
17.37
150.193
Your LTL carrier for Ontario and Québec Peace of mind transportation from our family to yours
Now serving Northern Ontario! www.MinimaxExpress.com
800-465-6657
32 July/August 2015 www.canadianshipper.com
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WE DID IT AGAIN! Thank You to our loyal clients and the GX team!
Outstanding Results delivered by Outstanding People.
We are proud to receive the Shipper’s Choice Award for Performance Excellence for the fourth consecutive year. Thank you GX Customers for your continued support. We will continue to go the extra mile for you. Thank you GX Team for surpassing industry benchmarks of excellence once again.
1-877-740-3940 | www.gxts.com | gxinfo@gxts.com
LTL • DEDICATED • TL • DIRECT • EXPEDITED • DRY VAN • REEFER • LOGISTICS • DISTRIBUTION ROAD • RAIL • AIR • OCEAN
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2015
SHIPPER’S CHOICE
up to more than $2 billion. Their annual supply chain budgets range from less than $100,000 up to more than $25 million. More than a third spend over 70% of their supply chain budgets on transportation. The Shipper’s Choice Awards Survey was undertaken once again in partnership with CITT and the Freight Management Association of Canada (FMA), two associations whose members responsible for the purchase of transportation number in the thousands. As in previous years, the research was conducted by an independent research firm. Winning carriers are listed alphabetically, and not by their total score. Those wanting to compare the scores among the winners should keep in mind the high probability that these carriers, although they are being compared to an industry benchmark, have been evaluated by different shippers. This survey is intended as a measure of which carriers exceed industry expectations and not a ranking of the carriers involved.
there is more than one case, then only the newest one is considered. Likewise, we check for similar IP addresses. As a final check on tampering, we separate and check the evaluations submitted by participants from our own e-mail list versus the e-mail lists of carrier customers. Winners must have evaluations submitted by transportation buyers from our own e-mail list to qualify for the award. More than 2,000 buyers of transportation services participated in our survey, which makes Shipper’s Choice the largest of the several surveys we conduct annually. Thanks to those who took the time to complete our survey. (Participants receive an advance electronic copy of the results.) About 10,000 evaluations of carriers from all modes providing services in the Canadian market were cast. As with past years, participants represent every region across Canada and buy transportation services for companies with annual sales ranging from less than $5 million
Sectoral distribution of respondents
Annual supply chain budget
Third-party logistics
Retail
12%
17%
More than $20M Freight forwarding
13%
$10M - $20M
6%
Manufacturing
42%
13%
7% $5M - $10M
23%
Less than $100,000
25%
10%
$100,000 $500,000
Other sectors
21% $1M - $5M
12% $500,000 - $1M
Gross annual sales
30%
20%
12%
11%
7%
11%
5%
7%
5 million or less
Over 5 million to 15 million
Over 15 million to 30 million
Over 30 million to 60 million
Over 60 million to 100 million
Over 100 million to 500 million
Over 500 million to 2 billion
Over 2 billion
34 July/August 2015 www.canadianshipper.com
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Thank you for trusting Meyers Transportation Services for nearly 90 years. Jacquie Meyers -President
1.855.214.0480
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Putting on muscle
2015
T
SHIPPER’S CHOICE
come under considerable pressure as the LTL sector pulls back into balanced capacity, which can only cause upward pressure on pricing. Our research shows that 42% of shippers expect to boost their use of LTL services this year while one in five expect this mode to hold the greatest pricing power in 2015. Thirteen carriers surpassed our Benchmark of Excellence this year, a drop from the 18 who did so last year. LTL winners and their scores for each of our eight KPIs are shown in the table below. The bottom row of the table shows this mode’s Benchmark of Excellence for each KPI. The total Benchmark of Excellence is indicated on the top right. The winners are shown in alphabetical order and only those scoring above the total Benchmark of excellence are included.
here were more than 3,700 evaluations cast by Canadian shippers for the LTL category. Customer service is considered highly important for shippers purchasing LTL transportation, ranking just behind on-time performance and competitive pricing. In fact, the customer service expectations for LTL are the second highest among all the modes in the survey but LTL carriers appear to be delivering on that score – the LTL mode receives the second highest customer service ratings of all the modes. The buyers of transportation responding to our survey were quite satisfied with the competitive pricing performance of their LTL carriers, ranking this mode’s performance on that KPI better than any other mode other than TL trucking. However, satisfaction with pricing is likely to
LTL Motor Carrier Award Winners
Total no. of shippers evaluating carriers in this mode: 2,413 Total carrier evaluations: 3,706 Benchmark of Excellence: 143.982 Carriers
On-time performance
Quality of equipment & operations
Information technology
Competitive pricing
Customer service
Leadership in problem solving
Ability to Sustainable provide transportation value-added practices services
All Connect Logistical Services
21.99
19.89
17.97
21.60
22.38
20.54
16.28
17.77
Apps Transport
20.96
19.32
16.86
21.28
21.25
18.75
15.23
16.72
Armour Transportation
20.61
18.56
16.37
20.24
20.73
18.55
15.52
17.40
Cavalier
22.37
20.64
17.95
21.51
22.25
20.38
17.40
18.56
Guilbault Transport
21.68
19.21
17.45
20.42
21.43
19.40
14.95
17.16
GX Transportation
21.84
19.90
18.10
20.91
22.69
20.43
16.37
18.20
Hercules
22.19
19.37
17.81
21.37
22.20
19.77
16.01
17.88
Meyers Transport
20.55
18.65
16.00
19.21
19.97
18.03
15.17
17.01
Minimax Express Transportation Inc.
21.76
19.44
16.76
20.65
20.36
18.58
15.31
17.14
Normandin Transit
20.77
20.39
16.78
19.60
20.98
19.57
15.62
17.44
Polaris
21.46
20.13
18.76
21.65
21.21
19.47
15.70
18.28
Robert Transport
20.91
19.45
17.58
18.99
20.57
18.30
15.63
17.76
Seaway Express
23.13
20.82
17.97
22.17
23.16
19.96
16.63
19.55
Benchmark of Excellence
20.44
18.50
16.36
19.87
19.89
17.78
14.57
16.57
36 July/August 2015 www.canadianshipper.com
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CELEBRATING 30 YEARS OF GROWTH For 30 years, Hercules has rejuvenated the level of service available in the market on US to Canada LTL shipments. We will continue to work hard to introduce innovations that others want to imitate, and traffic staff will enjoy. Thank you to the shipping community for your tremendous support, allowing a small forwarder to develop into a national award winning motor carrier. Hercules looks forward to introducing what’s next!
herculesfreight.com
youtube.com/user/herculesfreight
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Perennial leaders
2015
T
SHIPPER’S CHOICE
his has traditionally been the most hotly contested mode in our Shipper’s Choice Awards and this year is no different. You have to bring your A game to please Canadian buyers of TL services and the carriers that make the cut really deliver an excellent service offering based on the survey results. Once again, the TL category has the highest satisfaction score, making it more difficult to be named to the circle of winners in this modal category than any other. The TL mode leads all other modes in satisfaction scores for six of our eight KPIs – quality of equipment & operations; customer service; leadership in problem solving; ability to provide value-added services; and sustainable transportation practices. And to top it off, buyers of transportation services score the TL mode highest when it comes to satisfaction with competitive pricing. Like their LTL counterparts, Canadian TL carriers have been challenged since the recession with the need to replace their ag-
ing fleet. They are now starting to add to their fleets – 2014 was the sixth best year in Class 8 truck sales since 1999 and 2015 will likely be a bit better but buyers of transportation services are concerned trucking fleets are not growing fast enough and believe TL to already be in a tight capacity situation. About a third of the shippers believe this gives TL carriers the greatest pricing power in 2015. More than 1,600 shippers cast more than 2,000 carrier evaluations for the TL category. Twelve carriers surpassed our Benchmark of Excellence this year and two earned honorable mention. TL winners and their scores for each of our eight KPIs are shown in the table below.The bottom row of the table shows this mode’s Benchmark of Excellence for each KPI. The total Benchmark of Excellence is indicated on the top right. The winners are shown in alphabetical order and only those scoring above the total Benchmark of excellence are included.
TL Motor Carrier Award Winners
Total no. of shippers evaluating carriers in this mode: 1,600 Total carrier evaluations: 2,073 Benchmark of Excellence: 150.193 On-time performance
Quality of equipment & operations
Information technology
All Connect Logistical Services
23.45
20.99
Armour Transport/ Polestar
22.06
19.91
Carriers
Competitive pricing
Customer service
Leadership in problem solving
Ability to provide value-added services
Sustainable transportation practices
18.97
22.24
22.77
17.33
20.68
21.76
20.73
17.61
18.88
19.29
17.45
17.79
Cavalier Transport
23.08
20.52
18.15
21.98
22.19
20.48
18.39
18.94
Guilbault Transport
22.47
20.65
17.96
20.53
21.50
20.10
16.85
18.51
Hercules
23.56
20.88
19.37
22.44
22.58
21.30
18.51
19.39
IFS - Interstate Freight Systems
22.52
20.19
16.56
20.29
20.34
19.26
16.90
17.68
Keltic Transportation
22.47
20.00
17.32
19.80
20.77
20.50
16.94
18.78
MacKinnon Transport Inc.
22.74
21.06
18.48
20.87
21.68
20.21
18.05
18.31
Meyers Transport
21.13
18.83
17.56
20.98
20.19
17.89
16.90
17.37
Penner Truck Lines
22.51
21.19
17.56
21.59
22.37
19.47
16.74
17.90
Transpro Freight Systems
23.33
21.77
19.35
22.55
22.38
21.08
18.48
19.70
XTL Transport
22.60
20.47
18.24
20.60
22.39
19.55
17.37
18.41
Bison Transport*
20.18
19.57
17.25
19.87
20.35
18.81
15.87
17.98
Kriska Transportation*
20.87
20.20
17.56
19.69
19.95
17.44
15.96
17.68
Benchmark of Excellence
21.31
19.63
16.64
20.29
20.41
18.50
16.04
17.37
*Honorable mention
38 July/August 2015 www.canadianshipper.com
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TO ALL OUR LOYAL CUSTOMERS AND DEDICATED EMPLOYEES,
WE SAY THANKS!
For the fourth consecutive year, we have exceeded the industry benchmark in TL and LTL categories for the excellence of our services. Our image has taken a turn for the better ! The Guilbault Group is now more visible than ever with a fresh new look, one that is every bit as dynamic and professional as the services we offer.
Your vote of confidence fuels our success! 1.888.880.3801
www.groupeguilbault.com
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Managing the fast lane
2015
W
SHIPPER’S CHOICE
ho can be the master of faster – and manage doing so at a competitive price, while also maintaining excellent customer service? That’s the challenge buyers of courier services set for their suppliers and it’s not an easy mix. Keeping up with on-time performance demands requires sizeable investments in both fleet assets and information technology, which can be a real hurdle to providing the competitive pricing courier service buyers demand. This holds particularly true for the growing market of online sales, a distinct growth area for couriers which is hotly contested, and even more challenging in Canada where less populated city centres separated by greater distances than is the case in
the U.S. are definite obstacles. Still, there are couriers who prove more than capable of managing this tightrope of expectations. Seven companies surpassed the benchmark this year and one earned honorable mention. More than 1,300 shippers provided more than 2,200 carrier evaluations for the courier category. Courier winners and their scores for each of our eight KPIs are shown in the table below. The bottom row of the table shows this mode’s Benchmark of Excellence for each KPI. The total Benchmark of Excellence is indicated on the top right. The winners are shown in alphabetical order and only those scoring above the total Benchmark of excellence are included.
Courier Award Winners
Total no. of shippers evaluating carriers in this mode: 1,333 Total carrier evaluations: 2,269 Benchmark of Excellence: 142.306
Carriers
On-time performance
Quality of equipment & operations
Information technology
Competitive pricing
Customer service
Leadership in problem solving
Armour Courier Services
22.27
19.27
18.89
Cardinal Courier
21.45
17.76
17.19
Ability to provide value-added services
Sustainable transportation practices
20.93
21.38
21.72
18.96
19.54
16.10
16.79
17.31
15.99
17.38
Dicom
21.13
18.70
18.37
21.28
19.16
17.26
15.35
17.41
Fed EX
21.38
19.26
19.83
18.61
18.96
16.82
14.51
16.68
MBW Courier
22.59
17.65
16.82
21.30
20.05
17.17
14.57
15.35
Midland Courier
22.12
19.37
19.15
20.09
20.40
18.42
15.94
17.29
Tiger Courier
21.36
17.37
17.25
21.72
21.65
17.62
15.16
16.91
DHL*
20.31
18.06
18.30
19.92
18.68
16.58
14.22
16.22
Benchmark of Excellence
20.72
18.39
18.70
19.01
18.38
16.36
14.44
16.29
*Honorable mention
Experience what our customers are talking about. Superior Quality Service Flexible Solutions Value for your transportation spend 1-800-561-7121
www.midlandcourier.com
7
CONSECUTIVE YEARS
40 July/August 2015 www.canadianshipper.com
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CONSECUTIVE YEARS AS THE SHIPPER’S CHOICE IN... COURIER
•
LTL
•
TRUCKLOAD
Armour Transportation Systems is the only carrier in Canada to win the Shipper’s Choice Award in all 3 modes for the last 2 years. From all of us at Armour, we would like to say thank you for your continued support!
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2015
Rising above it all
SHIPPER’S CHOICE
A
irfreight is a high cost business for both the buyers and the providers of the service. And in this game ontime performance is definitely king. That’s followed by the highest customer service expectations of all modes. Not many can make the cut against such high demands but every year a few select air carriers do.
Airfreight carrier winners and their scores for each of our eight KPIs are shown in the table below. The bottom row of the table shows this mode’s Benchmark of Excellence for each KPI. The winners are shown in alphabetical order and only those scoring above the total Benchmark of excellence are included.
Air Carrier Award Winners
Total no. of shippers evaluating carriers in this mode: 345 Total carrier evaluations: 628 Benchmark of Excellence: 149.878
Carriers
On-time performance
Quality of equipment & operations
Information technology
Competitive pricing
Customer service
Leadership in problem solving
Ability to provide value-added services
Sustainable transportation practices
Cathay Pacific
21.49
18.50
18.62
18.99
22.16
18.67
17.00
17.86
Cargojet
22.95
20.25
18.94
19.96
21.78
19.89
17.05
18.16
Lufthansa*
21.33
20.06
20.20
17.14
19.82
18.04
15.66
16.92
Benchmark of Excellence
21.42
19.54
18.94
19.03
19.71
18.35
16.01
16.89
*Honorable mention
w w w. c a rd i n a l c o u r i e r s . c o m 1.800.387.3199
42 July/August 2015 www.canadianshipper.com
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2015
Looking for the next crest
SHIPPER’S CHOICE
P
rice is repeatedly the top criteria in selecting a marine carrier in our survey.Yet the many newbuilds leave investment costs that have to be recovered. The industry’s major players have been forming alliances in an attempt to shore up freight rates as well as raise ROI and reduce high-capital investments. Buyers of marine services however remain concerned about the impact on customer service
and on-time performance. Marine winners and their scores for each of our eight KPIs are shown in the table below. The bottom row of the table shows this mode’s Benchmark of Excellence for each KPI. The total Benchmark of Excellence is indicated on the top right.The winners are shown in alphabetical order and only those scoring above the total Benchmark of excellence are included.
Ocean Carrier Award Winners
Total no. of shippers evaluating carriers in this mode: 526 Total carrier evaluations: 561 Benchmark of Excellence: 142.344
Carriers
On-time performance
Quality of equipment & operations
Information technology
Competitive pricing
Customer service
Leadership in problem solving
Ability to provide value-added services
Sustainable transportation practices
Oceanex
19.42
18.64
17.25
18.90
18.90
17.75
15.37
16.50
Benchmark of Excellence
19.14
18.19
17.17
19.43
19.11
17.41
15.59
16.30
44 July/August 2015 www.canadianshipper.com
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Thank you for naming Cavalier as your Shipper’s Choice! Expanding Customer Service Through Innovation, Creativity and Teamwork!
Daily LTL Service Schedules Between Canada & the USA Over 35 Years Experience as a Full Service 3PL Transportation Provider Integrated Solutions to Cover All Aspects of Your Supply Chain Cost Effective & Innovative Logistics for Canada & the USA
At Cavalier, we deliver on the promises we make. We listen to the challenges our customers are facing and respond with unique, results driven solutions. We are accessible, accommodating and accountable. Our footprint is comprised of strong relationships and personalized performance that carries through each aspect of our operation.
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2015
CARRIERS OF CHOICE
SHIPPER’S CHOICE
Consistency of performance deserves a special award
C
tent excellence in their operations, carriers will have to meet a likely rising standard set by shippers from year to year while also responding to changing priorities. To remain part of this exclusive fraternity, carriers must requalify each year by having surpassed the Shipper’s Choice Awards Benchmark of Excellence for five consecutive years.
arriers are presented with this prestigious award if they have demonstrated the consistency necessary to attain the highest levels of service by surpassing the industry Benchmarks of Excellence set in the Shipper’s Choice Awards Survey for a minimum of five consecutive years. This is a particularly difficult task because aside from having to maintain consis-
Congratulations to the 2015 Carriers of Choice • All Connect Logistical Services • Cardinal Couriers
• Cargojet • FedEx • Hercules
• Mackinnon Transport • Midland Courier • Polaris Transportation
• Robert Transport • Transpro Freight Systems
CARR OF CH IER OIC E
DECORATED CARRIER FOR TRANSBORDER LTL & TL SHIPPING
Thank you for voting us as your 2015 Carrier of Choice!
Cross Border LTL and Truckload Freight Management Logistics Warehousing and Distribution
transprofreight.com
1.800.268.6857
46 July/August 2015 www.canadianshipper.com
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THANK YOU FOR NAMING POLARIS
ONCE AGAIN YOUR CARRIER OF CHOICE
Polaris AD
1.800.409.2269
FOLLOW US
info@polaristransport.com
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SCMA CONFERENCE
A BALANCING ACT
Ten key supply chain issues and trends you need to watch
H
ow do you align your business processes, physical assets and information systems to be able to provide value to your customers? How is the changing role of technology going to affect the retail space? These questions have taken on increasing prominence and finding the right balance is instrumental to effective supply chain management, according to P. Fraser Johnson, Ph.D, of the Ivey Business School at Western University, in a speech at SCMA’s annual conference in Halifax this June. Johnson is the Associate Editor with the Journal of Supply Chain management, and just finished a six-year term as director of the MBA Program at the Ivey Business School. The “fast fashion” retail model, such as introduced by global retailer Zara, is an example of a “disruptive business model” that aims for the rapid distribution and high turnover of clothing, which creates a challenge and some significant risks for the supply chain. Supply chains can have both a positive and a negative effect on your business. Supply chain failures affect performance and shareholder value, even long term profitability, Johnson said. “I’ve spent a considerable amount of time taking a look at what the trends are in the supply area. What are academics talking about? What are the leading practitioner journals writing about? What’s emerging or developing in the news? I’m also influenced by my own environment,” he said. Not ranked in any particular order, Johnson listed ten key supply chain issues that face senior managers and executives. Global sourcing “There’s been a lot of stuff written about reshoring. What we’re seeing here is a shift in terms of what the costs are of sourcing globally.With the fracking technology in the U.S. for example, we’ve seen greater access to energy at lower costs.The (Chinese) wage rate differential is still there but we’re seeing inflation in Chinese wage rates. Total cost models are also becoming more sophisticated. A lot of Fortune 500 companies have formally made plans to repatriate products.
But my view on this is that I’m not expecting a major repatriation of manufacturing into Canada or the U.S..The kind of products that can be brought back tend to be high value and difficult to manufacture, requiring processes that are complex and workers with a higher level of education to manage the more complex pieces of technology,” Johnson said. The real winners will be the regions with low cost structures, located close to major markets (i.e. Mexico, Eastern Europe). “I don’t think China is going away-a lot of the capacity China has is going to be focused on maintaining its growing middle class. They will continue to be a manufacturing powerhouse that will have expertise and skills that will still be important to North America,” said Johnson. Sustainability The traditional criteria for supply managers when evaluating sourcing is cost/price, delivery, and quality. Today, the new procurement must balance these with sustainability factors, noted Johnson. “If you take a look at how organizations are reacting to these things, you have companies like Walmart whose reaction has been to put in codes of conduct, supported by audits and monitoring. Another one is Proctor & Gamble which has come up with a supplier sustainability assessment, hoping to influence what industry practices.You have certification, you have industry standards, and finally you have companies that say the risk is just not worth it, so they limit global sourcing,” he said. Within the supply chain risk categories of operational, financial, and reputational risk, he said supply managers tend to focus mainly on the operational and financial. Risk is increasing in terms of prominence but price and cost are still the most important factors, Johnson said. Market price volatility: The challenges of commodity price volatility are going to affect every industry eventually. Transportation costs, hedging strategies, commodity-driven purchasing, all affect plans going forward.
BY JULIA KUZELJEVICH
Infrastructure There are some very real constraints in the North American transportation infrastructure, all of which will have repercussions for supply chain. “In 2007 we were pretty well peaking at capacity in terms of our transportation infrastructure-now we’re back at pre-recession levels and we’re seeing bottlenecks being created. So my view of the supply chain is we’ve got to take a look at the whole system. If we can’t transport it effectively then we’ve got problems. It’s all coming at a time when governments are facing constraints in their infrastructure investments,” Johnson said. Leadership Today’s Chief Supply Officer roles have greater responsibility and will carry more significant titles than ever before. “But what you’re also seeing is the pace of change of the CSO is changing in two areasthe tenure of CEOs is dropping, and the tenure of direct reports to the CEO is dropping. You’ve got to get in, set your agenda, make changes quickly and have an impact. We’re also seeing that people in the supply area don’t necessarily have a supply background-increasingly that role is a stopping spot for a high potential individual as he or she moves up the ladder and gets exposure,” Johnson said. Truck driver shortage With demographic shifts in consideration, North America faces a looming shortage of truck drivers. “I think paying people more money to work in the field is going to be part of the solution. So it affects everybody else in the room, because of capacity, availability and cost,” he said. Processes and technology Access: The issue with access is, how can we make data transparent and more available to our internal decision makers, to our customers and suppliers, and how can we relieve people in the organization from non-value added processing? “Smartphones are great things but they continued
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ed to supply chain safety will affect costs, flexibility and lead times,” he said.
put a lot of us in a mode where we’re on the job 24/7. With cloud computing systems, managing information systems can improve supply chain business processes and efficiencies and collaboration with suppliers," he said.
Metrics Companies do not do a good job measuring supply chain performance, Johnson said. “We focus on year over year price savings, usually with a 3-5% cost savings objective. In my humble estimation, most organizations either understate or overstate their savings. And both lead to bad decision making. Both have bad consequences,” said Johnson. Remedies to this are to maximize the supply savings by focusing on total cost vs. year over year price, and categorizing the types of savings, i.e. are they ongoing or onetype savings, and hard-wiring the savings into the budget. What are CEOs worried about overall? “Typically they are worried about total supply chain costs, their inventory and working capital deployment, customer service and customer satisfaction,” Johnson said. CS
Services supply chains Your service supply chain is as important as your product supply chain, stressed Johnson. “My view is that if you read the academic literature, if you read the management literature, it’s about how can you make things cheaper, faster than the competition. I don’t care if you’re talking about the car companies or technology firms, you still have to work with your suppliers to get things made and into the hands of your customers, on time, and seamlessly.” Safety and regulations There are increasing regulations and complexities that go into things like inspecting cargo. "Expect that increasing regulations relat-
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TAKING THE LONG TERM VIEW Applying the principles of supply chain management tips for success BY JULIA KUZELJEVICH
Patrick Etokudo, SCMP, has worked in all areas of supply chain management and currently manages major projects in supply chain at Enbridge Energy Inc. as Director, Supply Chain Management. Speaking recently at a gathering of supply chain professionals at the SCMA annual conference in Halifax, Etokudo said that supply chain is not only about the procurement of goods and services-it is “much more than what most of us in the room do”. Citing Martin Christopher, a renowned Professor of Marketing and Logistics at the Cranfield School of Management in the U.K., Etokudo said it is “supply chains that compete; companies do not”. Implementing change management principles in supply chain was the topic of Etokudo’s discussion. He stressed that to do this is to be focused on “achieving requirements that are important to the customer. It’s impossible to be strategic if you are not taking the long term view. Doing things the way you’ve always done them can be an enemy of progress,” he said. Looking at the value expectations of a modern organization, progress is often slow. Why? Largely because people have a fear of the unknown. “People hold on to certain beliefs, believing they know supply chain. Sometimes we do not have the depth, sometimes we need a different set of skills and competencies-sometimes these are not there when we start. We can learn from the trailblazers,” Etokudo said. Most of us are just not good at change management because naturally, most of us find comfort in the status quo. What change management tools can help transform organizations? “Most will change if the case is made (for it). Change is easy, but transition is hard, so it’s important to stay the course by setting a vision that is shared (by all stakeholders). This is a critical first step. Some-
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times authority is good but even a mandate can be fleeting if you don’t have people behind the vision,” he said. It’s important that you don’t seek to be “revolutionary” all the time in your approach to change. “It’s important that you create early wins, little victories, the low hanging fruit that points to the inevitability of the change, and the ‘go forward’ nature of the strategy. The supply chain function is badly in need of people who think strategically,” said Etokudo. Any goals and objectives of the change must be aligned with the company’s strategic direction. “If the goals and objectives are at odds with the strategic direction of the company, you’ll be fighting a lost cause. People get confused and become very tactical, and passive resistance develops. Good people start to get bored and frustrated, and the bottom line takes a direct hit,” said Etokudo. It’s by creating co-ownership that you’ll have an easier time getting the critical mass around your vision. “You should not attempt to push through change if you’re lacking the troops behind you. What’s the pathway to sharing? It’s to communicate, to sell, but also to listen and to seem to be listening,” Etokudo said. “People want to be associated with success. You can adjust the roadmap to incite feedback. But as a leader you probably want to spend 60-70% of your time engaging people,” he said. The next step is to find and leverage the champions of change. “It’s natural for people to resist change. There are those who are early adopters.You also have those who are just fed up with the way things are-go and find those guys, and cultivate their support,” he said. Engaging, engaging and engaging, assuming engagement goes two ways, is a critical step, because leaders are also human beings, and they also have their fears. “They are as vulnerable as the rest of us, so talk to them, sharing not just your vision but your ultimate objective,” he said. You have to be able to demonstrate you’ve achieved what you wanted to according to what the status quo and milestones were, by measuring, sharing and course-correcting. “I’m an avid believer in scorecards, but we should be honest when things are not going well. I don’t think that when we lose our place on a target that it’s bad to go back
and say what we didn’t achieve, and realize where you were short. When you set up your scorecard don’t set it up to achieve efficiencies when you’re implementing supply chain management. It’s even more important to measure value creation, and system adoption,” Etokudo said. CS
Editor Julia Kuzeljevich has been writing about transportation issues for 15 years. Her articles have garnered several transportation and Canadian Business Press writing awards.
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INTERMODAL
TAPPING THE TRADE ROUTE CSX OPENS ITS FIRST INTERMODAL TERMINAL IN CANADA
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INTERMODAL
BY CARROLL MCCORMICK
W
ith the opening of a new intermodal rail terminal in Salaberry-de-Valleyfield, Quebec last November, CSX Transportation is perfectly positioned to tap the rich flow of cargo between Eastern Canada and the United States. Located roughly 65 kilometres from downtown Montreal, the USD$100 million intermodal terminal can process 100,000 loads a year. The 36-hectare property has sufficient land to build a mirror image of the current yard layout to double this capacity, if required. “The targeted freight flow is cross-border, between eastern Canada and the southeastern U.S., the Ohio Valley and also into Mexico.We’ve built a terminal, on our mainline, connected into a 34,000-kilometre network that operates predominantly east of the Mississippi, serving two-thirds of the U.S. population,” says Ryan Houfek, assistant vicepresident, marketing, for CSX Transportation’s Intermodal division. “Our mission is tapping into the long-haul road traffic. Crossborder highway-to-rail conversion (H2R) is the core of the business plan for our terminal. We see enormous opportunity between the U.S. and Canada,” Houfek adds. The intermodal terminal will compete with long haul trucks and to a lesser extent with Canadian railways. “This is a mature truck market with a very large flow of potential intermodal traffic.We will connect the greater Montreal region to markets not served by other rail networks, in particular the southeast U.S. and the Ohio Valley, where other railways are going to Chicago or west of Chicago, for example. We are adding a lot of unique choices for shippers to convert to rail,” Houfek explains. CSX built 2.2 kilometres of track to tie the yard in with its existing line, plus support track and sidings. CSX also rerouted the existing rail line away from the centre of the city of Salaberry-de-Valleyfield. To the south, says Houfek, “There will be upgrading of the quality of the track to increase the speed of traffic between Syracuse, New York and Valleyfield.” The CSX line crosses the border at Fort Covington, New York. Its track in Quebec is part of the Montreal Subdivision, which dates back to 1888. It was part of the New York Central Railroad, later to become part of Conrail. CSX acquired it when the Conrail network was split in the 1990s. The inbound line splits into five parallel tracks in the intermodal terminal yard, each 730 metres long. On the day of the inaugural celebrations this May 11, containers printed with names like Safmarine, Maersk, Hamburg Süd, Fesco, CSX Intermodal, and Pacer Stacktrain were stacked between the tracks, ready to be hoisted by three 80-foot high Kone cranes onto trains and trucks. The intermodal terminal software system, iPro, is by Seattle,Washington-based Tideworks Technology. iPro directs the placement of containers as they come in the
Containers being hoisted by 80-ft. high Kone cranes.
gate and tracks the location of the Kone cranes in real time. Asked to illustrate how CSX incorporated new technology and lessons learned from existing intermodal terminals, Houfek says, “iPro directs the cranes the least amount of distance to build the trains optimally.The terminal design also enhances productivity. For example, we have a terminal outside Atlanta that was built in the late 1990s with comparable capacity to Valleyfield, [but] built on 81 hectares.” Trucks enter the intermodal terminal and drivers process their papers without leaving their cabs. They are directed to locations to either have containers unloaded or to pick them up. There are 100 chassis parking spaces near the tracks.With the planned procurement continued www.canadianshipper.com
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VALUE
ADDITIVE ONE OF THE FASTEST GROWING INDUSTRIES WORLDWIDE, HOW WILL 3D PRINTING AFFECT THE SUPPLY CHAIN? BY CAROLYN GRUSKE
A
lthough in existence for decades, additive manufacturingcommonly known as 3D printing-has been experiencing a newfound popularity, thanks in part to commercialization of consumer-grade products. But popularity alone isn’t a reason for jumping on the 3D printing bandwagon. Any business looking to adopt the technology should first understand what it means for the design and production processes and how supply chains are affected by those changes. “Additive manufacturing is one of the fastest growing industries in the world,” explains Ehsan Toyserkani, a professor at the University of Waterloo and director of its multi-scale additive manufacturing lab. “Every year the market size doubles or triples. Up to about 2011, the market was in the range of $1 billion. But over the last four years, it is something in the range of $7 or $8 billion and in two years, people are predicting it will be $20 billion.That’s why many businesses are coming into the market, and that will, hopefully, help bring down the capital required for purchasing machines and bring down the cost of materials. All that would be very helpful.” While the Waterloo, Ontario-based researcher calls the market opportunities “tremendous,” he is quick to point out that Canadian businesses aren’t as advanced in their use of the technology at the highest production levels, compared with their counterparts in the US, Europe or Asia. For example, GE Aviation now has a plant capable of printing complicated fuel nozzles for its LEAP jet engines.“I’d say in Canada, we don’t have any final products that have been 3D printed and used in engines or so forth.” 56
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Canadian businesses using additive manufacturing are typically doing so to create 3D models and prototypes of new products as a way of refining their designs.They are also using those models in the creation of better tools and moulds. Beyond that, some companies are using additive manufacturing techniques to repair cracked or damaged items. London, Ontario-based Trudell Medical International is one of the businesses using additive manufacturing in all of those ways. The company produces aerosol drug delivery devices and systems for the management of respiratory conditions under the AeroChamber Plus, Aerobika and AeroEclipse brand names. Trudell turned to 3D printing in the mid-1990s. Initially, it shipped its designs to a service bureau for printing, but eventually the process was brought in-house. Now, it operates two types of printers-a polyjet, which operates like an inkjet printer, spraying layers of resin, and a stereolithography (SLA) machine, which uses a laser to cure liquid polymers. Typically, Trudell’s engineers create and refine their designs during the day, and send them for printing overnight.When they arrive at work in the mornings, their prototypes await them. “The more iterations they go through and the more people who can see and touch the devices before we do the final version, the better off we are,” says Robert Mortin, director of new product development. “When we were using a service bureau, we would do maybe half-adozen to ten iterations on a design. On the product we just launched, we literally did over 100 iterations of that device before we finalized it. I would argue it took us a shorter time.The final design you are going ©belekekin/iStock/Thinkstock
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out with is more refined and has fewer problems downstream than we had before.There is less problem solving with all the components.” While the concept of 3D printing may cause those unfamiliar with the process to assume that parts are ready to use directly after they are removed from the printer, additive manufacturing is a bit more complex than that. “There are a lot of challenges in post-processing the models that come off the equipment,” said Trudell’s Peter Scarrott, associate director, new product development. “They’re not really usable right off the machine. The machine has to build supports to help the model build itself. The supports have to be removed. Sometimes that requires chemicals or solvents and sometimes you have to use equipment after the fact to remove it.That’s the big unwritten element of 3D printing that doesn’t get discussed very much, but it is a major burden on the operator of the equipment.” For companies that can’t bring 3D printing in-house, or are just beginning to use additive manufacturing, there are service bureaus that can produce submitted designs. Waterloo, Ontario-based Hy-
phen Services, a division of the digital display manufacturer Christie Digital, is one such provider. Hyphen began as Christie’s in-house 3D printing and testing centre (and still acts in that capacity) but morphed into a publically accessible service bureau offering a range of additive manufacturing technologies.When looking for a service bureau partner, Hyphen’s managing director, Mark Barfoot, suggests finding one that offers an assortment of technologies. “You don’t want to go to one that just has a single technology, because they try to make that technology fit, whether it fits or not,” he said. “Make sure there is somebody willing to work with you and explain it to you and get you educated on the best way to do it.” While many of Hyphen’s customers come from the KitchenerWaterloo area, Barfoot said it’s common for businesses to rely on service bureaus located outside of their immediate geographic area. “There aren’t a lot of service bureaus in Canada that are very extensive. A lot of people in Canada do source from the US,” he said. “Coming across the border usually adds a bit of a delay, so if you need continued
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something quickly, you are going to lose a day in shipping, so getting it in Canada is a benefit. “One issue that is happening in Canada is that for anybody in the aerospace market, some of the ITAR (International Traffic in Arms Regulations) restrictions mean they can’t source it from the US.They can source it within Canada or they have to source it from Europe or other places, because of the way ITAR is.They can’t send it across the border and then get it back across the border. That’s an issue, especially with metal sintering because aerospace is a proponent for metal sintering and people are struggling to get those parts into Canada right now.” (Hyphen doesn’t currently offer metal sintering services, although Barfoot said the company has been considering the technology.) While 3D printing can free-up designers to come up with revolutionary products, it may place restrictions on those looking to expand their list of supply chain suppliers. Printer manufacturers tend to require customers to purchase the raw materials-the polymers, resins and powdered metals-from them, using the argument that the quality of the printed product or the performance of the machine can’t be predicted unless a certain quality of source material was used. “You don’t have the luxury of purchasing materials from different suppliers. And typically they will sell it at a very inflated rate,” said Toyserkani, “but I think these issues will soon be resolved. Some of the major patents in this area have expired and more people are getting into the business. You can see the cost of materials coming down every month.” Montreal’s Pryogenesis Canada Inc. is one of those companies entering, (or more accurately re-entering) the market. Its core business is using plasma to process or destroy high-value waste including refrigerants, chemical warfare agents or pollutants from oil, gas and mining operations. In the past, however, it developed a way to use plasma to create the spherical metal powders that are used in some additive manufacturing processes. With the growing demand for metal feedstock, the company has renewed its interest in the market and has begun to sell kits to companies that want to create their own powders, thereby bypassing the proprietary raw materials offered by the printer manufacturers. According to Pryogenesis’ business development leader, Tom Whitton, “there is definitely a pushback from the aerospace and biomedical fields because typically when they are sourcing metal for their machine shops, they want to have control over that.” Whitton added that companies turning to 3D printing will likely turn away from more traditional partners. “You’ll be using a few less CNC machines, or a few less lathes, or less machining equipment than you would have normally used. So the ones supplying the equipment would see a downtick, but the uptick would be in the suppliers of 3D printers.” Toyserkani also believes that as more companies begin to use 3D printing as a production method, and not just a means of prototyping, the supply chain will evolve. “Some of the modules within the conventional supply chain will be gone. From my perspective, typically for conventional manufacturing purposes, you’d have to do some welding, but that will be gone. You won’t need to weld anymore. Some of those businesses might be affected. Definitely the number of modules, the number of steps within the supply chain theoretically must be reduced. Some businesses, some providers might be gone in 10 years.” CS 58
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REVOLUTIONARY PLAYER Will 3D printing be a supply chain disruptor? Today, 3D printing or additive manufacturing as it’s also called, is largely the domain of prototyping and samples. But as patents in the automotive, aerospace, and health care sectors expire, the small, customized items that 3D printing could address in these industries could eventually cater to this space. It’s something that will disrupt supply chains, said Landon White, management consultant with Ernst & Young, and a speaker at the recent SCMA conference in Halifax. White said in some ways 3D printing is akin to the “third industrial revolution.” “You’ll notice that prototypes are where this technology began, but 28% are actually getting installed. Rapid manufacturing is introducing materials and reducing downtime as it’s better to be looking at something rather than for something,” White said. He noted that Maersk has been experimenting with using 3D printers to fabricate spare parts on its containerships, and that GE Aviation has a goal of producing some 100 thousand 3D printed parts by 2020. They have already helped develop 3D printed parts for the Boeing 777X passenger jet. “When an OEM part is needed, and the 3D part is procured in house, there is full transparency,” White said. He said there are fewer process steps for 3D printed parts compared to common buying channels, which will become a supply chain advantage. Strategic sourcing becomes imperative when 3D printing in metal. “Currently, 2nd tier or 3rd tier suppliers source steel for the welding of parts and metal powders are expected to grow in demand (a spend of $8 billion by 2025 is expected for seven key materials involved in 3D printing) relative to the other base materials,”White said. Barriers could lie in the quality control(product safety and quality features must be proven), and in supplier relationships. Intellectual property barriers could also be an issue, if the digital form of a prototype becomes a security risk. Landon said we’re in a ‘watch and wait phase’ over the key considerations on the legal and intellectual property side of things. According to Annie Wang, Co-President, along with Zach Simkin, of services firm Senvol, (which conducts analytics exclusively for
By Julia Kuzeljevich
umes or have high fixed costs associated with them; where special parts have long lead times, or manufacturers want to get new products into the marketplace more quickly; where
the additive manufacturing industry), there are seven supply chain scenarios that tend to lend themselves well to additive manufacturing: where specific parts are built in low vol-
continued
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high inventory storage costs suggest making smaller batches on demand; to reduce the leverage that suppliers hold over manufacturers by creating an alternative or replacement source for critical parts; when time-sensitive parts are needed in remote locations with expensive shipping costs; when high import and export costs eat into profits for simple parts; and to reduce part count or boost performance beyond what is now possible. “It’s important to emphasize that additive manufacturing will not replace conventional manufacturing, and it applies to a minority number of products. This is not to say it might not change and become a lot less expensive and more reliable,” she said. Senvol has worked with a variety of Fortune 500 companies and government agencies in industries such as aerospace, oil & gas, consumer products, and automotive. The company recently launched a tool, the Senvol Database, a searchable database for industrial 3D printing machines and materials. Users are able to search the database by over 30 fields, such as machine build size, material type, and material tensile strength. The database is online and free to access. “Clients were asking seemingly simple questions but short of sifting through hundreds of pages of spec sheets it was difficult to find that answer. Many people encouraged us because it would be an incredible tool for the entire industry. We’ve had overwhelming response and we work very closely with the material suppliers to make
sure the information is accurate.The additive industry is moving very quickly in terms of new machines coming in to the market,” she said. “Aerospace is much further along than any other industry we’ve seen so far-they use high value alloys and have complicated parts. When you’re machining these-you are removing a huge amount of material to achieve the complex design. So additive makes sense in this area. Aerospace requires low volume parts-it makes sense why it would be more advanced. Automotive is starting to come up with the parts that are low in volume,” she said. Additive manufacturing could see a distributed supply chain model evolve from a centralized one.“Today you are already starting to see it, because objects that are not proprietary are being printed out all over the world. The idea is it’s still the manufacturer’s ownership of the file, but you no longer have to import the part. The product ‘crosses the border’ without crossing the border,” said Wang. Then there is the concept of 3D hubs where individuals with 3D printers can print out parts for people who are interested in purchasing them in a distributed supply chain model. As part of its offering, Senvol uses its proprietary algorithm to determine which parts can be more cost-effectively made using AM versus the status quo. Senvol’s algorithm analyzes the entire supply chain and factors in secondary costs such as inventory, downtime, and shipping, the company said. CS
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THE BIGGER PICTURE
PANAMA MAY BE A SOLUTION TO MORE THAN ONE BOTTLENECK Under construction since 2007, the Panama Canal expansion project reached 90% completion in May 2015. Slated to open next year, the Canal expansion represents more than a milestone in the growth of Panama; it also marks the inexorable progress of worldwide commerce stemming from the globalization policies that have defined world trade since the inception of the World Trade Organization in 1995. Alongside the Suez Canal which connects the Mediterranean Sea to the Arabian Sea (and by extension the Atlantic Ocean to the Indian Ocean), and the Strait of Malacca connecting the Indian Ocean to the Pacific through the South China Sea, the Panama Canal represents one of three critical east-west waterways for marine trade. Unable to keep pace with the acceleration of global trade however, these three marine routes have just as often been regarded as bottlenecks, incapable of handling larger ships or limited in terms of vessel throughput. Those limitations will soon improve as the capacity of the Panama Canal increases from 5,000 TEU vessels to ships carrying as many as 13,000 TEUs, and current dredging operations in the Suez Canal will see vessel transits almost double. An unanticipated result of the Panama Canal expansion may be the potential impact on trade flows at U.S. West Coast ports. The recent strike-related congestion at some of the major U.S. West Coast ports is quickly fading from memory since the ILWU (International 62
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Longshore and Warehouse Union), representing almost 14,000 workers at U.S. West Coast ports, and the PMA (Pacific Maritime Association), representing 72 companies operating at 29 U.S. West Coast ports from San Diego, CA to Bellingham, WA, signed a 5-year contract this year. It’s not expected that the new contract will remedy all problems and both sides have acknowledged it may not be entirely congenial, as evidenced by a labour dispute earlier this month that closed the port of Oakland for 24 hours. Combine that with Hanjin Shipping’s announcement in February that it would stop calling at the port of Portland, OR and there are clearly issues still to be resolved. Now that a new contract is in place, port and ILWU officials at Los Angeles are assuring customers they will work hard to regain their trust. And in case those customers have stopped listening, they are reminded that the cost of shipping containers from Asia to West Coast ports is almost half the cost of re-routing those same containers to U.S. East-Coast ports. Whether or not those customers most affected by the last labour disruption are still listening is anyone’s guess, especially since much of the double-digit drop in freight at U.S.West Coast ports last year was absorbed by U.S. EastCoast ports, as well as Vancouver and Prince Rupert, BC. What the ILWU and PMA may be overlooking however is that, in addition to bringing increased activity to west coast ports, globalization has also
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brought new choices to consumers. There is growing recognition that many consumers value service as much as cost in some cases, resulting in the willingness of consumers to substitute another brand if the product they are looking for is unavailable.Ths trend strikes fear in the marketing departments of companies no matter what coast they are on. Most companies are able to compete on price, it’s quite another thing to compete on product availability, especially if your customer buys your competitor’s product and finds it preferable to yours. Handling shipments at half the cost of competing ports does not benefit importers who are out of stock and whose inventory is stuck in port or on ships unable to dock. In other words, globalization has also promoted awareness for importers and manufacturers of the value of consistent service and reliable suppliers. Cheaper shipping and handling costs don’t benefit importers if their products are not available when their customers want to buy them. The Panama and Suez Canal projects are marvels of human engineering, creativity and a determination to find solutions to
some of nature’s most daunting challenges. Like water finding its way to the lowest point, commerce will eventually find its way to the most effective solution. If globalization contributed to congestion at U.S.West Coast ports, improvements by the Panama and Suez Canals to provide access to U.S East-Coast ports will affect the competitiveness of West Coast ports in terms of service. Prince Rupert, offering the shortest Pacific sailing route to Asia, the deepest natural harbour in North America, and CN Rail service to the U.S. Midwest as part of Canada’s Asia–Pacific Gateway and Corridor Initiative, also poses a viable option to inconsistent service offerings U.S. West Coast ports. In order to remain competitive, port stakeholders need to develop creative approaches to managing their operations, and realize that, first and foremost, ports have to serve their customers. Without that recognition, commerce will find an alternate solution, and it may surprise some people. CS
Laurie Turnbull, CITT, P.MM is a supply chain consultant with Cole International, a leading Canadian logistics company providing Customs brokerage, warehousing and worldwide transportation services. He can be contacted at laurie.turnbull@cole.ca.
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